Texas Statutes and Rules Common To All Lines

The term *insurance transaction* includes any of the following (by mail or any other means):

Solicitation; Negotiations; Sale (effectuation of a contract of insurance); and Advising an individual concerning coverage or claims.

Risk Manager

A person who, for compensation, examines, assesses or evaluates risks for, and provides advice for reducing risks to a person who seeks to obtain or renew property and casualty coverage in Texas. A person may not act or hold themselves out to be a risk manager unless licensed as such in Texas. To be licensed as a risk manager, a person must submit an application on the proper form to the Commissioner and must meet the following standards: -Be at least 18 years of age; -Maintain a place of business in Texas; -Meet the application requirements; -Take and pass a licensing examination; and -Pay the examination and licensing fees.

The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer's investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?

Insurers can *delay an acceptance or rejection decision* for 30 days if arson is suspected.

Insurer (or principal)

Is the company or organization that issues a policy of insurance. Insurance companies can be classified in a variety of ways based on ownership, authority to transact business, location of incorporation (domicile), marketing and distribution systems, or rating (financial strength).

The Department can issue a license to an individual applicant who meets all of the following requirements:

-Is at least 18 years old; -Has passed the required licensing examination in the last 12 months*; -Has submitted the application, required fees, and any other required information required by the Department; and -Has not committed any acts for which a license may be denied.

An agent's license will terminate within how many days from the due date of obligatory fees and continuing education requirements?

90 days

Stock Companies

Companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Officers are elected by the stockholders and manage stock insurance companies. Traditionally, stock companies issue *nonparticipating policies*, in which policyowners do not share in profits or losses. A nonparticipating (stock) policy does not pay dividends to policyowners; however, taxable dividends are paid to stockholders.

When an individual obtains an insurance license for the primary purpose of writing insurance on him- or herself, or for members of his or her immediate family, or business, this is called

Controlled business. In this state, at least *25%* of a licensee's total volume of premiums in a calendar year must be from business *other than* controlled business.

Once a claim is approved, how long does an insurer have to pay that claim?

Once a claim is approved, the insurer must pay the claim within *5 business days* after the insurer notifying the claimant that a claim will be paid. Surplus lines insurers have until the 20th business day to pay the claim under these circumstances. Insurers who delay payments may be subject to additional damage payments. If an insurer delays payment of a claim *later than 60 days* from receiving the required statements and forms from the insured, the insurer must pay the claim with an *additional interest of 18% per year*, including any potential attorney's fees as a result of the delay. This does not apply to cases arising from arbitration or litigation.

The Commissioner may impose an administrative penalty on a licensee who violates any of the following:

The Insurance Code; Another insurance law of this state; or A rule or order adopted under the Insurance Code or another insurance law of this state.

Agent Appointment

The authorization of an agent to act for or represent an insurer. When an insurer terminates an agent's appointment, it must immediately file with the Commissioner a statement of the facts related to the termination and the date and cause.

Adjuster

The following types of adjuster's licenses are available in this state: -All lines; -Property, casualty and surety; and -Workers compensation, employer's liability, U.S. Longshoremen's and harbor workers compensation insurance.

An insurance agent wants for a client to replace her current annuities plan with another one. He presents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. The policyowner ends up surrendering her original contract and replacing it with the new one. Which term best describes what the agent did?

Twisting. Twisting is an illegal act, in which an agent misrepresents the terms of an insurance or annuities contract or draws incomplete comparisons, in a way that would compel the insured to surrender the contract for the new one.

An applicant properly notifies her insurer of a straightforward claim, but the insurer waits an exceedingly long time to process it. Which of the below terms best describes the behavior of the insurer?

Unfair claims settlement practice

Inducement

an offer that attempts to influence the other party

Exempt

not subject to an obligation

Prompt Payment of Claims

Claims must be settled promptly. No later than the *15th business day* following receipt of a notice of a claim, the insurer must do the following: -Acknowledge receipt of the claim; -Begin an investigation of the claim; and -Request all statements, forms and items that the insurer believes will be required from the claimant. Surplus lines insurers have until the 30th day following receipt of a notice of a claim to perform the above requirements.

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of

Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

Statute

a formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code

Recirprocity

a mutual interchange of rights and privileges

Cease and desist

to stop or discontinue

How many days after the date the Commissioner's order becomes final, does the person have to pay the penalty, or file a petition for judicial review?

30 days

All of the following statements apply to temporary licenses EXCEPT

A. They may be issued without a written examination. B. They are valid up to 90 days. *C. They may be renewed.* D. They require 40 hours of license training. Temporary licenses may be granted up to 90 days without examination to applicants who complete a 40 hour training course before applying for the license or within 14 days after applying for the license. A temporary license cannot be renewed.

Expiration of License

An agent's license must be renewed every *2 years* on the licensee's birthday, either on even-numbered or odd-numbered years depending on when the license was issued, and will continue in effect until refused, revoked or suspended by the Commissioner. The Commissioner will send an agent whose license is about to expire notice of such expiration at least *30 days before that date.*

Continuing Education

Continuing education (CE) rules are established to protect the public by maintaining high standards of professional competence in the insurance industry, and to maintain and improve the insurance skills and knowledge of licensed producers.

The Commissioner has full power and authority to do all of the following EXCEPT

Draft insurance laws.

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?

Insurance agent The Commissioner must have at least 5 years of experience in one of the following occupations: an executive in the administration of business or government, a practicing attorney, or a certified public accountant.

Domestic Insurer

Is an insurance company that is incorporated in this state. In most cases, the company's home office is in the state in which it was formed — the company's domicile. For instance, a company chartered in Pennsylvania would be considered a Pennsylvania domestic company.

Mutual Companies

Owned by the policyowners and issue *participating policies*. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are *a return of excess premiums and are, therefore, nontaxable*. Dividends (unused premiums) are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus. Dividends are *not guaranteed.*

Anyone who violates the Insurance Code of Texas may be fined up to

$25,000 and/or directed to make complete restitution to Texas residents or entities injured by the original violation.

*The Texas Department of Insurance (TDI) may require an insurer to file periodic reports based on complaints of unfair settlement practices. The reports must contain the following information:*

*-The total number of claims from the past 3 years, and information on how or if they were settled; and -The total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint.* Failure to maintain records of the complaints above is an unfair claim settlement practice.

An Insurance Service Representative may perform any of the assigned duties in the office of a property and casualty agent, EXCEPT

*A. Solicit applications for insurance.* B. Explain insurance coverages of a policy. C. Quote insurance premium rates. D. Issue binders with the express approval of an agent.

Fraud

Is the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party. Fraud is grounds for voiding an insurance contract.

The person charged with an emergency cease and desist order may request a hearing to contest or review the charges.

The request must be made *within 30 days* of the emergency cease and desist order. The hearing to show cause why the emergency cease and desist order should not be affirmed or modified must be held *no later* than the *10th day after the date the Commissioner receives the request for a hearing unless the parties mutually agree to a later date.* (The emergency cease and desist order remains in effect until the hearing is held.)

How long until anyone who has their license revoked apply for another license in Texas?

5 Years

Commissioner

the head of the State Department of Insurance

All of the following are requirements for an individual to be licensed EXCEPT

Provide a financial statement.

A person who violates a cease and desist order of the Commissioner will be subject to an administrative penalty:

$1,000 for each violation; or $5,000 for all violations. If a person has been found by a court to have violated a cease and desist order, that person must pay a civil penalty of $50 or $500 for willful violations. The state may recover the penalty in a civil action.

On determining that a person committed such a violation, the Department will make written findings, and issue and serve on the person a...

*Cease and desist order* The agent must appeal to the court system if he or she disagrees with the order. (Note that this cease and desist order is different from the emergency cease and desist order as it comes after a hearing has determined the person charged to be guilty of the violation.)

An individual licensed as an agent must notify the Texas Department of Insurance (TDI) on a monthly basis of any of the following:

-A change of the mailing address; -A felony conviction; or -An administrative action taken against the licensee by a financial or insurance regulator of Texas, another state, or the United States.

A corporation or partnership must notify the Department no later than *30 days* after the date of:

-A felony conviction of a licensed agent; and -The addition or removal of an officer, director, partner, member, or manager.

If an agent allowed his or her license to expire, the following reinstatement rules apply:

-If expired for *no more than 90 days*: the license may be renewed by filing a renewal application, paying the renewal fee, and paying an additional fee (equal one-half of the renewal fee); -If expired for *more than 90 days but less than 1 year*: the licensee may obtain a new license by filing a new application with the Department, paying the license fee and an additional fee equal to one-half of the license fee. A license examination is not required. -If expired for *more than 1 year*: the license cannot be renewed. The person must go through a complete licensing process as required by the State for any new applicants. In addition, the agent may not use any continuing education credits that were obtained before the new license is granted to satisfy any certification course or continuing education course requirements for the new license.

Continuing education specifics

-Licensees must complete *24 hours* of continuing education every renewal period before the expiration date of the license, unless otherwise exempt. At least *2 of CE hours must cover ethics*. If a licensee holds more than one license, the licensee is only required to complete 24 hours of CE for all licenses during the license period. -*All CE hours must be completed during the reporting period*; licensees are not allowed to carry over excess hours to the next reporting period. Licensees cannot receive credit from duplicate courses during the same licensing period. -If a licensee does not complete the *24 hours* of CE *before* the expiration date of the license, the licensee will have *90 days* to complete the deficient number of hours and pay a fine of $50 per deficient hour. If these two conditions are not met within 90 days of the license expiring, the license will be inactivated, and the licensee will have to apply for a new license. -At least *50%* of all required continuing education hours must be completed in a classroom or a classroom equivalent setting approved by the Department. The Department may accept continuing education hours completed in other professions.

The following acts, when performed by insurers or agents, constitute the *business of insurance* in this state:

-Making or proposing to make an insurance contract; -Taking or receiving an insurance application; -Receiving or collecting any consideration for insurance, including a premium, a commission, a membership fee, an assessment, or dues; -Issuing or delivering an insurance contract; -Directly or indirectly acting as an agent for an insurer; or -Doing any kind of insurance business specifically recognized as constituting insurance business within the statutes of the Insurance Code.

An agent completed a CE course in 2019. Until what year must the agent keep the records of completion?

2023. Producers must maintain records of completion of continuing education courses for 4 years from the date of the course completion.

If an agent suspects that insurance fraud is being committed, within how many days must the agent notify the Insurance Fraud Unit of the Department of Insurance?

30 days

Counselor

A life and health insurance counselor is any person who, for a fee or commission, offers to examine a life, accident, or health insurance policy, an annuity, or pure endowment policy, to give a recommendation or information regarding the policy's terms, conditions, benefits, coverage or premiums.

Nonresident Agents

A nonresident agent is one who resides or is domiciled in a state other than Texas. A nonresident can be licensed as an insurance agent if the Texas licensing requirements are met, as long as the agent's home state gives Texas residents the same privilege (reciprocity). The applicant must hold a license in good standing in his or her resident state. The Commissioner can enter into *reciprocal agreements* with officials of other states to waive the written examination requirements for applicants who reside in those states, as long as the following conditions are met: -The other state requires agent licensing applicants to pass a written examination; -An appropriate official of the other state certifies that the applicant holds a currently valid insurance license in that state, and either passed a written examination or held a license before examinations were required; and -The applicant has no place of business within Texas as an insurance agent.

Which of the following persons is required to hold a producer license?

A person who negotiates insurance contracts. Persons who perform clerical tasks that are not related to soliciting or negotiating insurance contracts are not required to be licensed.

Which of the following is NOT a possible penalty for a violation of the Insurance Code?

A. A cease and desist order *B. A fine up to $100,000* C. An administrative penalty D. Payment of restitution The penalty for a violation may not exceed $25,000.

Which of the following will NOT be considered unfair discrimination by insurers?

A. Charging applicants with similar health histories different premiums based on their ethnicity B. Cancelling individual coverage based on the insured's marital status C. Assigning different risk classifications to applicants based on gender identity *D. Discriminating in benefits and coverages based on the insured's habits and lifestyle*

Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?

A. Failure to respond promptly on claims communications B. Delaying a settlement because there is an additional insurance policy on a loss *C. Denying an unsubstantiated claim* D. Refusing to pay claims without conducting a reasonable investigation Insurers do not have to pay unsubstantiated claims, which means that the claimant failed to submit the required proof of loss.

All of the following statements about the continuing education requirement in this state are true EXCEPT

A. Hours may be completed using independent self-study courses or classroom study. B.It requires satisfactory completion of 24 hours of approved training every 2 years. *C.All licensed agents must comply by January 1 of even-numbered years.* D. It does not allow excess credit hours to be carried forward to the next reporting period. Continuing education reporting period coincides with the license renewal date every 2 years.

All of the following are unfair claims settlement practices EXCEPT

A. Refusing to pay claims without conducting a reasonable investigation. B. Failing to adopt and implement reasonable standards for settling claims. C. Failing to acknowledge pertinent communication pertaining to a claim. *D. Suggesting negotiations in settling the claim.* When settling claims, negotiation can come into play.

Which of the following is NOT a licensing requirement for a corporation in the state of Texas?

A. The business must be a Texas corporation, with its principal place of business in Texas. B. At least one officer of the corporation must be individually licensed as an agent. *C. The business must be able to pay up to $50,000 in the event that it is proven to be negligent.* D. The business must demonstrate financial responsibility to provide coverage for an error or omission. All of the above criteria are true, with the exception of the amount of money a business can afford to lose, in the event that it is proven to be negligent. A business only needs to be able to pay $25,000.

False Advertising

Advertising covers a wide scope of communication, from publishing an ad in a newspaper or magazine, to broadcasting a commercial on television or the Internet. Advertisements cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. The violation of this rule is called *false advertising.* It is prohibited to advertise or circulate any materials that are untrue, deceptive, or misleading. False or deceptive advertising specifically includes misrepresenting any of the following: -Terms, benefits, conditions, or advantages of any insurance policy; -Any dividends to be received from the policy, or previously paid out; -Financial condition of any person or the insurance company; or -The true purpose of an assignment or loan against a policy.

Fiduciary Capacity

Although the agents act for the insurer, they are legally obligated to treat applicants and insureds in an ethical manner. Because an agent handles the funds of the insured and the insurer, he/she has fiduciary responsibility. A *fiduciary* is someone in a position of trust. More specifically, it is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

Insurance Services Representative

An *insurance service representative license* is required for each person who is employed only in the office of a property and casualty agent on a salaried basis to perform assigned duties including explaining insurance coverage, describing an insurance product, quoting insurance premium rates and issuing insurance binders only with the express approval of the property and casualty agent who supervises the insurance service representative. (The provisions that apply to a general license apply to an insurance service representative license, except that proof of financial responsibility is not required.)

Corporations or Partnerships

An agent license may be issued to a corporation or partnership if it has been admitted to transact insurance in this state, and has submitted the application and paid all the required fees. In addition, the following requirements must be met: -At least one officer of the corporation or one active partner of the partnership is individually licensed separately from the corporation or partnership; -An officer, director, member, manager, partner, or other person who has the right or ability to control the corporation or partnership has not had a license suspended or revoked or been the subject of any other disciplinary action by a financial or insurance regulator of any state in the United States, or committed an act for which a license may be denied; -The corporation or partnership has the ability to pay any amount up to $25,000 on a claim or compensation for a negligent act, error, or omission; and -Each location from which the corporation or partnership will engage in business in this state is registered separately with the Department.

If the Commissioner believes any licensed agent is engaged in any form of unfair method of competition or trade practice, is in a hazardous financial condition, or that an unlicensed person is engaging in the sale of insurance, the Commissioner may issue...

An emergency cease and desist order, served by registered or certified mail. The order must state the charges and require the person to immediately stop committing the acts, methods or practices in violation. The order must also explain the rights of the person charged with the order. Unless the person in violation requests a hearing, emergency cease and desist orders are final *31 days* from the date they are received.

Alien Insurer

An insurance company that is incorporated outside the United States.

Agents

Any person who solicits insurance on behalf of any insurance company, takes or transmits (other than for himself or herself) an insurance application or policy, examines any risk or loss, or receives, collects, or transmits any premium, is considered to be the agent of the company for which the act is done. Agents are normally compensated by commissions, where a percentage of the premium is paid to the agent by the insurance company.

Licensing

Applicants for an original insurance agent license in Texas must submit the required written application and nonrefundable filing fee (up to $50) to the Commissioner. The application must include the applicant's full name, age, occupation, place of residence and business for the past 5 years and a statement as to whether the applicant has ever held a license before, been refused a license or had one revoked. The Department of Insurance can deny an application if a complete set of fingerprints is not provided upon request.

Which members of a corporation or partnership are required to obtain an individual insurance agent's license in order for the association to be licensed?

At least one officer or partner and any other person acting as an agent

Certificate of Authority

Before insurers may transact business in a specific state, they must apply for and be granted a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set by the state. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered *authorized or admitted* into the state as a legal insurer. Those insurers who have not been approved to do business in the state are considered *unauthorized or nonadmitted.* Most states have laws that prohibit unauthorized insurers from conducting business in the state, except through licensed excess and surplus lines brokers. *Insurers must obtain a Certificate of Authority prior to transacting business in this state.*

Rebating

Defined as any inducement offered to the insured in the sale of insurance products that is *not specified in the policy*. Both the offer and acceptance of a rebate are illegal. Rebates may include, but are not limited to, the following: -Rebates of premiums payable on the policy; -Special favors or services; -Advantages in the dividends or other benefits; and -Stocks, bonds, securities, and their dividends or profits. The state regulations do not prohibit agents from giving or providing promotional materials, educational items, articles of merchandise, or traditional courtesy commonly extended to consumers valued at *$25 or less.*

Unfair discrimination

Discrimination in rates, premiums, or policy benefits for persons within the *same class* or with the same life expectancy is illegal. No discrimination may be made on the basis of an individual's marital status, race, national origin, gender identity, sexual orientation, creed, or ancestry unless the distinction is made for a business purpose or required by law.

Limited Lines

If considered necessary by the Commissioner, the Department may issue a *limited license* to an applicant in the manner otherwise provided for the issuance of a license under the statutes of the Insurance Code: -The license must specifically limit the types of insurance that may be handled by the person; and -The person may not adjust claims in a kind of insurance other than that for which the adjuster is specifically licensed.

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?

Illegal under any circumstances. When a company criticizes the financial situation of another company with the intention of injuring that company, it has committed an illegal trade practice called defamation.

How are insurance companies classified?

Insurance companies are classified according to the *location of incorporation (domicile).* Regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state. A domicile refers to the location where an insurer is *incorporated*, not necessarily where the insurer conducts business.

Intent to Actively Engage in Business of Insurance for General Public

Insurance licenses are issued with the intent that the licensee will engage in the business of insurance with members of the general public, and that the license will not be used primarily to earn commissions on personal business, from the licensee's immediate family or close associates — known as controlled business. In the state of Texas, at least *25%* of a licensee's total volume of premiums in a calendar year must be from business other than controlled business (from persons other than the applicant and from property other than that on which the applicant controls the placing of insurance through ownership, mortgage, sale, family relationship, or employment).

Surplus Lines

Insurance that is not available in the regular marketplace from admitted insurers is referred to as Surplus Lines. It usually involves insurance for *high-risk individuals*, and is placed with *nonadmitted insurers* who specialize in offering insurance to the high-risk market. While surplus lines insurers are not admitted, most states require that they be on that state's "approved" list.

Foreign Insurer

Is an insurance company that is incorporated in another state, the District of Columbia, or a territorial possession. Currently, the United States has 5 major U.S. territories: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. For example, a company chartered in California would be a foreign insurer within the state of New York. A company chartered in Puerto Rico will be foreign in any U.S. state.

Managing General Agent (MGA)

Is any person, firm or corporation who has supervisory responsibility for the local agency and field operations of an insurance company within Texas or is authorized on behalf of a company to accept or process insurance policies other agents produced and sold. An MGA may perform any of the following acts for a company: -Receive and pass upon daily reports and monthly accounts; -Receive and be responsible for agency business; -Handle the adjustment of losses; or -Appoint or direct local recording agents, state agents or special agents within Texas.

Because the Commissioner's role is to enforce insurance laws and to protect the public from unfair trade practices, if the Commissioner suspects that an insurer or its agent has committed a violation or is engaged in an unfair trade practice, the Commissioner may...

Issue a *statement of charges* and *hold a hearing* for any purpose deemed necessary (within the scope of the Insurance Code). The Commissioner may *not* hold the hearing *before* the 6th day after the date the notice is served.

Misrepresentations

It is illegal to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc. This also refers to oral statements. Committing this illegal act is called *misrepresentation.* It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to misrepresent an insurance policy by: -Making an untrue statement of material fact; -Failing to state a material fact necessary to make other statements made not misleading; -Making a statement in a manner that would mislead a reasonably prudent person to a false conclusion of a material fact; -Making a material misstatement of law; or -Failing to disclose a matter as required by law.

Texas Lloyds

Lloyds are insurance companies regulated by the Texas Insurance Code that consist of an arrangement between an attorney-in-fact and at least 10 underwriters (individual, partnership, or association of individuals) to provide property and casualty insurance. An insurance corporation and a Lloyds company have a different structure: Lloyds maintain an *Articles of Agreement and Power of Attorney* vs. an Articles of Agreement for the insurance corporation. Lloyds are required to maintain a $2 million statutory minimum as aggregate of guaranty fund and unencumbered surplus (contributions from the underwriters). The Guaranty Fund of the Lloyds is held under a joint control agreement with the Commissioner of Insurance in a Texas bank.

The following acts, omissions, or practices are defined as unfair and deceptive claim settlement practices when knowingly committed or performed with such frequency as to indicate a general business practice, and are prohibited:

Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue; Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim; Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims; Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insureds; Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear; Refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made; and Compelling insureds to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits.

Defamation

Occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. This also applies to statements that are *maliciously critical* of the financial condition of any person or a company.

In addition to the suspension or revocation of a license, the Commissioner may impose any or all of the following penalties:

Order the payment of an administrative penalty; and/or Order the licensee to make restitution.

Restitution

Restoration to the original condition or payment

Commissioner of Insurance: General Power and Duties

The Commissioner is the chief executive and administrative officer of the state Department of Insurance. The Commissioner must be a citizen of the state of Texas, be well informed and qualified in the field of insurance and insurance regulation, and have at least *5 years of experience* in the administration of business or government or as a practicing attorney or certified public accountant. The Commissioner is appointed by the Governor for a *2-year term* ending on *February 1 of each odd-numbered year.* The Commissioner has the following broad powers and duties: -Regulate the internal affairs of the Department of Insurance; -Prescribe forms and procedures to be followed in proceedings before the Department; -Aid in the interpretation of any state insurance law; -Issue insurance licenses and certificates of authority; and -Enforce penalties, fines, denials, suspensions or revocations of licensees and certificates of authority.

Temporary

The Commissioner may issue a temporary life insurance agent's license, *effective for 90 days*, without requiring a written examination to applicants who complete a 40-hour training course before applying for the license or within 14 days after applying for the license, to the following people: -An applicant who has submitted the application and fee and wants to collect premiums on industrial life insurance contracts during the period of the temporary license; or -Anyone who an insurer is considering for appointment as a full-time agent, as soon as the department receives the application and a certificate signed by the insurer's authorized representative requesting a temporary license for the applicant being considered. Temporary licenses are *not renewable* and cannot be issued more than once in any *6-month period* to the same applicant. Temporary licensees cannot sell insurance that replaces an existing individual life insurance policy or annuity contract that is in force. Limitation does not apply to temporary agents who write accident and health policies.

After determining that a violation has occurred, the department may issue a report to the Commissioner, stating the facts on which the determination is based and the department's recommendation on the imposition of an administrative penalty, including a recommendation on the amount of the penalty.

The department must give written notice of the report to the affected person *no later than 14 days after the date the report is issued*. This notice must include a brief summary of the alleged violation and a statement of the amount of the recommended penalty. The notice must also inform the person that he/she has a *right to a hearing* on the occurrence of the violation, the amount of the penalty, or both. The person has *20 days from receiving the notice* to accept the determination and recommended penalty or to request a hearing.

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?

The hearing must be held within 10 days of the Commissioner receiving a request, unless both parties agree to a later date.

What should a person do that suspects that a fraudulent insurance act has been or is about to be committed in this state?

The person must report the information in writing to the Insurance Fraud Unit of the Department within *30 days*. A report made to the insurance fraud unit constitutes notice to each other authorized governmental agency.

Examination of Records

The purpose of the examination of insurers' books and records is to ensure that the companies remain solvent and conduct business in compliance with state laws and regulations pertaining to licensing, policy forms, rates, claims, and market conduct. The Commissioner must examine *all authorized insurers at least once every 5 years*. This examination requirement applies to all domestic insurers (organized under Texas laws), as well as admitted foreign and alien insurers. The cost of examinations is the responsibility of the insurance company being examined.

The penalty for a violation may not exceed $25,000, unless a greater or lesser penalty is specified by the Insurance Code or another insurance law. *The Commissioner will notify other state Commissioners or similar officers of penalties handed out*. The amount of the penalty is based on the following factors:

The seriousness of the violation, including the nature, circumstances, extent, and gravity of the violation, and the hazard or potential hazard created to the health, safety, or economic welfare of the public; The economic harm to the public interest or public confidence caused by the violation; The history of previous violations; The amount necessary to deter a future violation; Efforts to correct the violation; Whether the violation was intentional; and Any other matter that justice may require.

Surrender of License

The surrender of an agent's license to the insurance department will not negate any offense committed before the surrender's effective date. Surrendering the license will not keep the agent from being penalized.

An agent holds an insurance license in the state of Kansas and would like to transact insurance in Texas. The agent became licensed before written examinations were required. Therefore, the agent has not actually passed any kind of examination. Which of the following is true?

The written examination requirement will be waived.

After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as

Unfair. Unfair settlement practices include refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss. The claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made.

Emergency Adjuster

When a catastrophe or emergency arises out of a disaster, act of God, riot, civil commotion, or conflagration, the Commissioner may issue an emergency license to an applicant whose application is certified within 5 days after the applicant begins work as an adjuster by one of the following: -A licensed adjuster; or -An insurer that maintains an office in the state and holds a certificate of authority for insurance business in the state. A person or insurer that certifies the emergency application will be held responsible for loss or claims practices of the emergency license holder. The emergency license may be issued for a period of *90 days*, and can be revoked for any cause. The emergency license applicant need not be a state resident or otherwise licensed adjuster.

Moral turpitude

conduct that is contrary to community standards of justice, honesty or good morals

Coercion

forceful act or threat aimed to influence a person to act against his or her will

home office

insurer's headquarters, principal place of business

Commission

payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium

Boycott, Coercion and Intimidation

t is illegal to be involved in any activity of *boycott, coercion, or intimidation* that is intended to restrict fair trade or to create a monopoly. This would include unfair behavior that influences not only clients, but competing agents and brokers. Coercion is to require, as a condition to a loan, that the applicant purchase insurance from a specific insurer.

Insolvent

unable to meet financial obligations